Bernard Durkan (Kildare North, Fine Gael)
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157. To ask the Minister for Finance the extent to which his Department monitors the economic impact of energy costs; and if he will make a statement on the matter. [6062/17]

Michael Noonan (Limerick City, Fine Gael)
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I should clarify initially that my Department has no statutory function in the monitoring or setting of gas or electricity prices. Responsibility for the regulation of the electricity and gas markets is a matter for the Commission for Energy Regulation (CER), which is an independent statutory body.

However, my Department does monitor and advise on all developments that can impact on the economy, including oil price movements. By January of this year, the price of Brent crude oil had increased by around 24 per cent in euro terms (17 per cent in US dollar terms) since September 2016, when the macroeconomic projections that underpin Budget 2017 were finalised. I should note that oil prices were expected to increase this year and, indeed, this was highlighted as a risk in the Economic and Fiscal Outlook published with Budget 2017.

Ireland is a net energy importer and, as such, increases in oil prices have a negative impact on real economic activity in Ireland. Higher energy costs increase firms' input costs, thereby reducing profitability. At the household level, higher energy prices are likely to lead to a fall in real disposable incomes through higher inflation.

However, the recent increase in oil prices has to be considered in a longer term context; January's oil prices were still around 34 per cent lower in euro terms (almost 50 per cent in US dollar terms), compared to where they were in January 2014. 

Also, in recent years consumer price inflation has been near zero in Ireland reflecting inter alia the impact from falling oil prices. A more prolonged period of low inflation would therefore not be welcome as this could potentially lead to a deflationary spiral which would hurt our longer term growth prospects. As a result, the economic impact from recent increases in oil prices is likely to be modest.

My Department will update its inflation forecasts with the publication of the Stability Programme Update in April of this year, which will incorporate the impact of the moderate rise in oil prices seen over recent months.